Why Are We Waiting (for Peak Oil)?

Remember those long holiday road trips where the question endlessly repeated was “are we there yet”? Well, for many in the peak oil community, waiting for it to arrive has evoked a similar feeling, as the predictions of some academics, commentators, and bloggers have failed to materialize punctually. So, it’s worth revisiting some thoughtful papers that reveal a more sophisticated approach to timing the peak date. This may give people a greater appreciation of the challenges of predicting such a complex event.

Various mathematical models have been evoked to relate production to estimations of the total amount of oil that can be extracted, also known as the ultimately recoverable resource (URR). These include linear, exponential and, most famously, Hubbert’s logistical model. Attempts have been made to determine the best fit of these models to historical production. However, in terms of prediction, none are necessarily more correct than the others. The outcomes they predict are strongly determined by the assumptions and parameters used to shape the resultant curves.

No doubt, the size of the assumed URR can have a large effect on the date of the peak. But equally so can the values for the rate of oil production growth and decline which determine the symmetry of the production curve. A higher rate on the decline side creates a production curve skewed to the right, and vice versa.

It was with this in mind that researchers at the US Energy Information Administration (EIA) attempted to use mathematical modelling to predict a date for a peak in global oil production1 (see Fig. 1). For the sake of simplicity we’ll consider their analysis, and some others, with a mid-range estimation of URR of 3000 Gb. For a realistic growth rate of 2% annually they made a prediction of a peak in 2037. In doing this they made an assumption of a reserves to production ratio of 10 (i.e. decline rate of 10% annually), which was based on US historical production experience.

However, the decline rate assumptions by the EIA researchers left them open to criticism by later modellers as being unacceptably high. This was because the US decline rate they used was based on proven reserves and not on the larger estimations for URR for the US. These researchers claimed that the decline rate in reality should have been much lower. This would have, in effect, shifted the estimated peak prediction years earlier.

More recent analyses have instead been based on various growth and decline rates, leading to a range of prediction dates for a peak in production. For simplicity, and to enable a comparison among these and the earlier EIA model, we’ll keep our assumption of a URR of approximately 3000 Gb and a growth rate of around 2%. This growth rate is close to that observed globally so far. When we make these less restrictive assumptions and use decline rates realistically varying from 2 – 6%, we get a time range of 2019 – 20262 and 2013 – 20333 from the two studies, respectively (see Fig. 2).

These results cast a different light, not only on the prediction of a peak in oil production, but indeed on our ability to precisely predict the date. It is worth noting that many early peak oil predictions have been based on symmetrical production curves where production growth and decline rates were equal. This is a reasonable assumption for prediction when the actual future values for these rates are unknown. However, in reality, production curves are rarely symmetrical.

Related to these comments, an analysis by HSBC Bank in 2016 indicated that, due to the nature of oil production where larger fields are exploited first, later decline rates may be higher than those used in symmetrical Hubbert modelling. Their conclusion was that they may in fact be 6% on average. So, whereas a prediction of 2037 based on a 10% decline rate for mid-range URR may be improbably late, a prediction before 2020 based on relatively low decline rates may be improbably early. One of the above studies showed that of 64 global production scenarios 53 gave a peak before 20302, so we can be reasonably confident of a peak before then.

Admittedly, the above interpretation of these studies is a simplification, but it does illustrate a couple of points. Firstly, for any given assumption of URR, there can be a large range of predicted global production dates dependent on the assumptions of growth and decline rates that were made. Hence, we should not expect a punctual prediction of a peak date due to the large errors inherent not only on our limited knowledge of URR, but also production, which may affect the real date by many years.

Additionally, it also explains the large gap in a date made for peak oil by different researchers, public energy agencies and informed commentators. So our impatient holidaymakers may have to patiently wait a little longer for the reality of peak oil in a finite world!

No one really knows how much shale oil will ultimately be produced. The technology is still evolving and the break-even price point keeps falling.

Without a good estimate on the amount of shale oi in the world,, it isn’t possible to predict when peak oil will occur.

Cheers!

penury on Wed, 5th Apr 2017 12:57 pm

The thing about “peak oil” is we can argue about “when” but it seems that no one is arguing about “if” any longer. That is progress i guess. Peak oil will occur, just like “peak” everything else. As is true in most of life, “timing is everything” and we do not have a time yet.

Davy on Wed, 5th Apr 2017 1:00 pm

Simplicity of PO predicting is the problem nothing is straight forward and simple anymore and this is especially true of PO. The other issue is related to oil itself in its relationship to the global economy. The economy defines oil as oil allows the economy. Is the economy growing and what is a real unadulterated growth figure? What is the real impact of alternatives on oil? How is more expensive oil impacting the global economy? There is plenty of oil currently but this is coming at a cost. Many want to think technology got us this supply but it was also financial easing and artificial liquidity. The oil infrastructure and new discoveries are suffering from excess supply. This will have longer term impacts as oil producing nations continue to need more funds to cover their social needs. Unmet needs are causing social decay and failing states. We have hardly touched the hard to get oil of the Arctic and global shales. This lack of future productive capacity will surely limit the economy that will limit oil. We are entering a trap and alternatives will never get ahead of this trap. Clearly global trade is a declining growth rate. Declining growth is still growth but the issue is minimums of growth that support any growth. There is a point the global economy will unravel from “not enough”.

Our modern civilization is bumping into limits of all kinds. Population is growing relentlessly with current population problems just growing worse. Climate is destabilizing. We can’t just divorce peak oil issues from life. These other issues influence civilization that influences oil and the whole issue of oil production. They play a part in the complexity of it all. Peak oil is not what it used to be. It is not the singularity that once dominated our doom world. It is now just another issue in the dynamics of decline.

We are in a “zone” of turbulence where none of us really know which way we are going. Academia and MSM paints its hollow picture of progress while signs of decline are everywhere. Many of us hope for that special breakthrough to delivers us from the gauntlet of doom. False breakthroughs are a steady pulp fiction in today’s increasingly empty journalism. People will believe any good news if it is tech based.

The reason those who acknowledge decline are on to something is this is a finite planet and we are clearly hitting limits. Technology and our economic system are in diminishing returns. Technology is failing to substitute for depletion and failing to advance our complexity as needed per our many problems. The economy is clearly in stagflation with a moral hazard of a Ponzi policy of extend and pretend. Our future is unfunded and borrowed on.

It is all these other issues that come into play with the idea of peak oil today. The oil resource is there but what about the civilization to utilize it? Peak demand and its cousin demand destruction are in this mix. I appreciate the esoteric study of a peak oil period or date. This is fine but for me as a doomer I am looking for a holistic view. I want to view a painting of civilization systematically and see peak oil. Peak oil is alive and well and is being joined at the table by others that are its equal in for our last supper.

rockman on Wed, 5th Apr 2017 3:03 pm

penury – Good points. But: “As is true in most of life, “timing is everything” and we do not have a time yet.” I would offer that with respect to PO timing is rather irrelevant. For instance many decades down the road we’ll feel comfortable say global PO happened during the 2Q 20??. And we may see that the oil price (in 2017 $’s) then was $20/bbl. Or $120/bbl. And that much of the world had the oil it needed or that numerous economies were suffering greatly due to a lack of available oil. How can that be true? Easy enough to see: in 1979 oil (in 2017 $’s) was almost $120/bbl. And in 1998 it was less then $20/bbl. And global oil production was even close to either date as proven by the current rate.

And the Rockman is always amazed to see projections with such sharp declines. Especially since there’s neither a historical nor physical basis for such a prediction. Again easy to prove. The global oil decline will be the cumulative effect of all individual country decline rate. And with the exception of political upheaval the decline of no country has ever exhibited such a high decline rate as so many predict.

And what about individual country decline rates themselves? That would be a function of the cumulative decline rates of the individual oil producing trends. And yet such high decline rates are virtually unknown for those trends. Even more important trends tend to not develop simultaneously. We’ve just witnessed an extreme example of that FACT: with the development of the shale trends the US oil decline didn’t just slow down the US decline rate but actually reversed itself big time.

And now what about individual trend decline rates? Same dynamic: virtually all the decline rates of oil trends have been lower (often much lower) then production increased. IOW the ramp up phase was much faster then the decline phase.

And now what about individual field decline rates in the various trends? Same dynamic: the decline rates of almost every oil field has been much lower then production increased. IOW the field ramp up phase was much faster then the field declined. Even if one considers shale wells as one well fields those high “field decline rates” are buffered by the continuous development of new shales. Just look at the lack of a “cliff” in shale production despite the drastic decrease in the number of new wells. And a simple explanation: so many more shale wells have entered their relatively low decline rate phase that the initial high decline rate of a much smaller number of new wells is masked.

And now what about individual wells (that make up each field) decline rates? Same dynamic: the decline rate of each oil well is much lower since each well typically begins producing at its max rate. And while some wells (like those drilled on the edgde of a reservoir) can exhibit a very high decline rate the average well declines slowly.

So individual wells decline slowly…which is why fields decline slowly…which is why trends decline slowly…which is why countries decline slowly. Which leads to the FACT that global production will decline slowly because of the simple reality that no component exhibits high decline rates that so many predict.

If someone wishes to dispute that then simply show how any of the production sources (wells, fields, trends, countries) that combine to produce that global rate declines so fast so as to produce a high global production decline rate.

Hello on Wed, 5th Apr 2017 3:20 pm

Sadly it seems to be true. Short of nuclear war nothing’s gonna do us in anytime soon.

1. gw: move north
2. energy: use tech to get to abundant sources
3. water: new desalination methods appearing
4. food: gmo to feed the masses
5. health: new antibotics

Can humans be stopped? It almost seems like not.

Hawkcreek on Wed, 5th Apr 2017 4:45 pm

When I joined this forum in August of 2004 I thought that PO would be pretty obvious when it hit (wrong again).
But I did something about it, and now I don’t care if it hits or not.
You have to live like you will still be alive tomorrow, not like your playpen will be totally wrecked, your diaper soggy, and your bottle late again.

rockman on Wed, 5th Apr 2017 5:57 pm

Hawk – Depending on your age you may have already survived the worst personal impacts of the Peak Oil Dynamic. It’s possibly those under 25 yo who have the most to worry about.

Nony on Wed, 5th Apr 2017 6:10 pm

Go back and read The Oil Drum posts. Look at Deffeyes. The peakers screwed themselves.

Hawkcreek on Wed, 5th Apr 2017 7:15 pm

Tru dat, Rock.
But I don’t even worry about my grandkids any more, very much. It has always been a dangerous, competitive world, and they are well suited, and equipped, to play in that venue.
If it wasn’t peak oil, it would be the Mongols invading, or the indians raiding along the Pecos river, or climate change or some other danger. This world is made to experience, and a totally comfy world would drive us all to suicide after a while.

GregT on Wed, 5th Apr 2017 9:24 pm

“It’s possibly those under 25 yo who have the most to worry about.”

Hundreds of millions of people around the world are already experiencing the full impact of peak oil in their daily lives. Those numbers will continue to grow as time goes on.

Hawk – So true. Like all the pissing and moaning about potential terrorist attacks. The odds of getting killed by a drunk driver in Houston is thousands of times higher then getting wacked by a jihadist. And other then a rare word from Mothers Against Drunk Driving you hear little about the 10,000 killed every year in alcohol involved accidents… about 30% of all auto accidents. And about 1,000 of those are children. About 3,000 were killed in the worst terrorist attack in the US and sincd then more the 150,000 have died in alcohol involved accidents.

More rediculous stats. Compared to 9/11: twice as many die annually from texting while driving; the same number are killed yearly by hippos in Africa; every 5 years as many die from autoerotic asphyxiation; every 7 years as many die falling out of bed; 50% more people have been killed by dogs in the US since 9/11 then killed by terrorists that fall day.

I could go on but I think that makes the point about the real dangers in life.

GregT on Thu, 6th Apr 2017 2:47 am

You’re clueless Boat. Not ‘Your’ clueless. The fact that you still can’t figure out the difference is self explanatory.

GregT on Thu, 6th Apr 2017 2:57 am

“I could go on but I think that makes the point about the real dangers in life.”

In America perhaps, but let’s try not to forget that the other 95% of the human beings on this planet do not live in America.

Ghung on Thu, 6th Apr 2017 10:47 am

Peak oil won’t be (isn’t) a matter of geological or technological inability to produce at current levels. It will occur as a result of a global inability to maintain the global economic ponzi scheme that is sending signals very much like we saw pre-2008.

….Since Trump was elected and started talking about deregulation, the big six bank stock values have collectively skyrocketed 33.5 percent (as of March 10th). Bank of America tops that rise with an eye-popping increase of 48.8 percent in three months. Goldman Sachs and Morgan Stanley shares shot up 36.6 percent….

….Since the 2008 financial crisis, the big six banks’ total assets have increased by 21 percent. The big four by 25 percent.

Yet, of the total Global Derivatives Notional amount of $544 trillion, the big six U.S. banks carry $168 trillion of it. Comparing that figure to their total assets, we get a leverage amount of 24 times. To put that in perspective, that’s only slightly less than the leverage their derivatives positions before the 2008 crisis.

The biggest banks are still the ones most at risk, and most threatening to anyone with money in the stock market. Cracks have started popping up that make it clear to us that the next financial crisis is just around the corner….”

Personal debt is back up to near pre-2008 levels, though more of it is unsecured debt (not mortgages), like sub-prime auto loans and credit cards.

More than seven years after the Great Recession officially ended, there is yet more depressing research that at least half of Americans are vulnerable to financial disaster.

Some 50% of people is woefully unprepared for a financial emergency, new research finds. Nearly 1 in 5 (19%) Americans have nothing set aside to cover an unexpected emergency, while nearly 1 in 3 (31%) Americans don’t have at least $500 set aside to cover an unexpected emergency expense, according to a survey released Tuesday by HomeServe USA, a home repair service. A separate survey released Monday by insurance company MetLife found that 49% of employees are “concerned, anxious or fearful about their current financial well-being.”

One explanation: Americans are crippled under the same amount of debt as they had during the recession. The New York Federal Reserve on Monday predicted that total household debt will reach its previous peak of $12.68 trillion in 2017. The last time it reached that level was in the third quarter of 2008, during the depths of the Great Recession. Indeed, it’s already close: Total household debt in the fourth quarter of 2016 was $12.58 trillion. Fewer borrowers have housing-related debt in 2017 and, instead, have taken on auto and student loans…..”

It won’t matter how much oil there is if people can’t afford to pay for it. This time will be global, and peak oil will be in the rear-view mirror for good. The $trillions in bailout funds for TBTF anything won’t be there, and our entire economic/energy party will go into terminal decline.

rockman on Thu, 6th Apr 2017 12:22 pm

Ghung – So true: there’s so much out there with huge potential negative effects on society compared to any correct effect of how much oil is being produced at any point in time.